crowdsourcing

VCs Still Sourced for Small Business Startups

There was talk that the JOBS Act would move small business startups away from venture capitalists and toward crowdsourcing options. It appears it’s not an either/or situation but both/and.

Funding Stats Regarding Small Business Startups

From a survey done by national law firm Dorsey & Whitney (originally done in 2010 and recently updated), we learn that:

  • 36% of small business startups in major metropolitan areas did a round of funding (29% prior in 2010)
  • 30% of CEOs expect to raise between $1M to $5M (23% prior)
  • 15% used business incubators (9% prior)
  • CEOs strongly preferred to seek funding from established relationships (i.e. not crowdsourcing)

Another Crowdsourced Option For Small Business Startups

While I mentioned crowdsourced consulting in an earlier post, it seems we have another similar company.

GenCrowd is also provides crowdsourced outsourcing for small business startups. It’s unclear from their website whether they’re familiar with their competitors or what their USP might be over them.

They have a similar story from the previously mentioned AskYourUsers.com.

“The volume of work that startups have to do, atleast initially – from idea brainstorming and validation, brand naming, tagline and slogan generation, logo design, web design and development, content and copywriting, all the way down to website and usability testing, SEO and marketing, analytics research, customer service, and a whole bunch of other issues – can take a real toll on people and businesses alike,” said Barun Rath, founder of GenCrowd.

“Going through the steps, GenCrowd was conceptualized from these issues that we personally faced when starting a business – we were looking for resources to provide us with different ideas and perspectives on different aspects regarding the business we were working on at the time. And so, the idea behind GenCrowd was formed – an online marketplace allowing people to crowdsource ideas, content, and feedback for their business needs.”

GenCrowd seems different in that it allows “blind” listings which means you can solicit feedback without any of the experts being able to see each others’ solutions. Of course it’s hard to beat AYU’s ties with LinkedIn – whatever that benefit might be.

Sources:

Startup CEOs Crave Venture Capital, Not Crowdsourcing

GenCrowd Leverages “The Wisdom of Crowds” to Help People Get Ideas, Content, and Feedback for Their Business Needs

Crowdsourced Consulting Small Business Ideas

Clive Thompson: Why Veteran Visionaries Will Save the World

Comments:

It seems to go without saying that we prefer working with people we know when that’s an option. But to extrapolate that to the conclusion that crowdsourcing isn’t gaining traction does small business startups a disservice. It’s zero sum thinking.

Before, venture capitalists were the main game in town. You may have got funding based on your relationships with them. Of course you had to have a solid idea too. But the relationship needed to be there.

With crowdsourcing, a whole new source of funding is opening up to the market. People without prior VC relationships will now have options where they can prove their idea and expertise.

Small Business Startups Demographics

Of course there’s the debate about preferred startup CEO ages. If anyone does a demographic study on that, I’d like to know. One I saw said the average age of startup CEOs from 1995-2005 was 39 but that older professionals start different kinds of companies than younger ones.

Clearly the older ones are going to be the ones more likely to seek funding and in all likelihood, the younger ones be more inclined to pursue crowdsourcing for small business startups.

Crowdsourced Consulting Small Business Ideas

More Crowdsourced Small Business Ideas

Askyourusers.com is a new crowdsourced solution among small business ideas. It’s a new twist on crowdsourcing that can help facilitate the market research process on a smaller budget.

Prior to this small business idea, market research has been conducted by in-person focus groups, recruiting from Craigslist and formal surveys.

“Micro-Consulting” For Small Business Ideas

Now, entrepreneurs will be able to get “micro-consultations” for their small business ideas. They will be 15 minutes duration for about $22 on average. It’s a quick way to vet small business ideas.

Small Business Ideas Marketing Research

Per their website, other uses are usability testing, professional advice, general advice or small business idea validation. They initially plan to find users through LinkedIn.

Said founder Amelia Dunne:

But after a month of development, we were still trying to validate the idea in order to feel comfortable spending our time and money building the prototype,” she says. “The validation process was time consuming, expensive and we weren’t finding the right people to talk with or getting objective feedback. AskYourUsers.com is the tool we wished we could use – but it didn’t exist. We determined that the value in it made AskYourUsers.com worth developing even if only for our own use. Quickly, it made clear business sense as well. We were surprised to learn how inefficiently other startups were conducting their market research, holding focus groups and learning about their customers’ needs/interests.

Sources:

New Crowdsourcing Launch: AskYourUsers.com Uses LinkedIn To Help You Find People For Microconsulting Projects

AskYourUsers.com

Comments:

Small business ideas that help owners do what they need to do more efficiently at a lower cost will always be welcome innovations. The sweet spot is creating enough value while keeping that value sufficiently uncomplicated.

Most small business owners aren’t going to be doing market research very often so the interface needs to be simple enough that they don’t have to relearn a system every time they need something.

From the look of the website, AskYourUsers.com seems to have accomplished the simple interface and made a valuable addition to small business ideas.

Small Business Ideas: Jumpstart Our Business Startups Act (JOBS)

Small Business Ideas: Obama SigningSmall Business Ideas: Jumpstart Our Business Startups Act

The summary version is that the JOBS Act lowers the bar for people to invest in small business ideas. President Obama signed it into law on April 5th, 2012. The SEC has 9 months to write the rules under which it will be implemented.

Small Business Ideas: Crowdsourcing

One of the major features will be crowdsourcing. In a nutshell, it means that a crowd of people will be able to invest in small business ideas. Prior to this, the regulations were more strict about who could invest. There will still be investment limits based on income but at least now most people will have a chance.

Small Business Ideas: Internet Portal Funding

Another important feature for small business ideas is that a major distribution channel for this crowdsourcing will be via internet portals. There are already sites designed to match angel investors with startups but now that’s expected to increase substantially. Think Kiva.org for American companies.

“It will make it easier for small businesses to attract investors, to gain access to capital, to become the next big thing,” said Tom Quaadman, a vice president of the U.S. Chamber of Commerce.

Sources:

Small businesses raise cash from crowds

How the JOBS Act Will Disrupt Funding for Small Businesses

Wikipedia: Jumpstart Our Business Startups Act

Comments:

While some criticize the bill saying it will open consumers to predatory and fraudulent investing schemes, one has to ask: aren’t we already? If anything, it gives consumers more control over their own lives.

Yes, we’ll want more third party safeguards and seals of approval. In the age of social media, we’ll look for credibility from others who have had good investing experiences. No doubt a whole new industry will spring up around giving innovative small business ideas the credibility they need to attract investment.